Standing Committee G

[Miss Anne Begg in the Chair]

National Minimum Wage (Enforcement Notices) Bill [Lords]

Resolved, 
That, during proceedings on the National Minimum Wage (Enforcement Notices) Bill [Lords], the Committee do meet on Tuesdays and Thursdays at five minutes to Nine o'clock and at half-past Two o'clock.—[Alan Johnson.]

Anne Begg: I remind the Committee that there is a financial resolution in connection with the Bill, copies of which are available in the Room. As a general rule, adequate notice should be given of amendments. My co-Chairman and I do not intend to call starred amendments, including those that may be reached during our afternoon sitting. I also remind members of the Committee to switch off their mobile telephones. No amendments to clause 1 have been tabled.Clause 1 Enforcement notices

Clause 1 - Enforcement notices

Question proposed, That the clause stand part of the Bill.

Alan Johnson: It is a pleasure to serve under your chairmanship for the first time, Miss Begg.
 No amendments have been tabled to the Bill, apart from the amendment involving privilege that I shall deal with when we discuss clause 2. This small Bill was debated extensively on Second Reading, but I shall briefly explain the background. 
 We created a network throughout the United Kingdom of 12 enforcement teams operated by the Inland Revenue to investigate and identify non-compliance with the national minimum wage. For three years, the teams issued enforcement notices that required employers to pay the minimum wage in future, or make good arrears of the minimum wage, or both. In August 2002, the Employment Appeal Tribunal ruled in the case of Inland Revenue v. Bebb Travel plc that officers could only issue enforcement notices requiring the employer to pay the minimum wage in respect of current and future pay periods, or in respect of current, future and past pay periods. 
 That ruling means that enforcement officers cannot currently issue notices in respect of arrears for past periods alone, so we cannot cover arrears owed to former workers. The Government are determined to restore the position to what we believed it to be before the Bebb decision, hence the Bill. There was broad consensus throughout the House on Second Reading and I hope that that will continue today. 
 Clause 1 deals with the power of enforcement officers to serve enforcement notices on employers for the recovery of the national minimum wage. It inserts a new subsection (2A) after section 19(2) of the 
 National Minimum Wage Act 1998. That will allow an enforcement officer to serve an enforcement notice on an employer, imposing a requirement on him to pay a worker who has at any time qualified for the minimum wage arrears of pay in respect of one or more past pay reference periods. He will be able to serve such a notice whether or not he imposes, or might impose, a requirement on the employer to pay the worker the minimum wage in future. 
 It will not matter if the worker no longer qualifies to be paid the minimum wage by that employer—because, for example, he is no longer employed by that employer. The notice can relate to that worker alone, or, by virtue of section 19(3), to a number of workers. The same notice can therefore deal with a combination of past or future periods and past or current employees. 
 Enforcement officers will be able to issue notices by virtue of new subsection (2A) for pay reference periods that ended before the passage of the provision. However, workers are already entitled under the National Minimum Wage Act 1998 to bring claims in respect of such periods. The Bill will not give workers an entitlement to minimum wage arrears that they did not previously have. 
 The amendments made by the Bill to the 1998 Act will also have effect in the application of the Act to enforcement of the agricultural national minimum wage. 
 New subsection (2B) states that enforcement notices will only be able to extend back for a period of not more than six years, starting from the date of the service of the notice. The key issue is the fulfilment of the Government's policy of restoring the position to what we believed it to be before the Bebb decision. All sides desire clarity and consistency and this new subsection makes it clear that the Revenue has the right to go back for more than three years, but does not have the right to go back further than six years. That provision will give the Revenue greater flexibility and conserve and focus resources, but reassure the business sector that action by enforcement officers cannot extend back over an infinite period.

Henry Bellingham: It is a pleasure to serve under your chairmanship again, Miss Begg.
 I am grateful to the Minister for the clear and concise way in which he has explained clause 1. The essence of the Bill is to restore the position to what the Government believed it to be and what Parliament believed it to be when the original legislation—the 1998 Act—was passed, but I should like to pursue one or two points that emerge from clause 1. 
 First, there is the six-year limitation. As we discussed on Second Reading, in the county courts there is a six-year statutory limitation period. Most of the cases go forward in the county courts, rather than in the employment tribunals, for the simple reason that a case in employment tribunals has to be launched within three months of the last underpayment. Can the Minister tell the Committee what percentage of the cases brought so far has been brought in employment tribunals? Is it a very small percentage? Are we talking 
 about 20 per cent., or 10 per cent.? It would be quite useful to know that. 
 On the six-year limitation, the Minister, Lord Sainsbury of Turville, brought to the attention of the other place the fact that companies only have to keep records going back three years. I made that point on Second Reading, and I hope that the Minister for Employment Relations, Industry and the Regions will elaborate on it today. Although he replied to most of the points made on Second Reading, I still want further clarification. If a company only has to keep records going back three years under company law, what happens if, for example, it has chucked out all its payroll records, but the employee who is claiming underpayment of the minimum wage has kept his pay slips and other relevant payroll information, and the case then goes to court? A company could be at an unfair disadvantage because the person who is taking the action will have information to hand, whereas the company will not. I want the Minister to comment on that. 
 The discussion in the other place resulted in an amendment being tabled to introduce the six-year limitation. As the Minister pointed out, before that, the period could have been infinite and the enforcement officers could have gone back more than six years, although it is very unlikely that they would have done so. The national minimum wage legislation only came in three years ago, so the discussion is academic. However, it is important for the future. Since Second Reading, I have been lobbied by one or two business organisations, which are concerned about the three-year rule for keeping records. 
 Will the Minister speak to his colleagues in the Department of Trade and Industry and the Treasury about the three-year rule? It probably makes sense that companies should not have to keep records going back more than three years, given the overall ambit of record keeping in the corporate sector, but perhaps they could keep payroll information for six years. That, at least, would obviate the set of circumstances that I have flagged up, in which a company is taken to court by an employee who has been unfairly treated and that employee had the information to hand. The court may say that the company got rid of its information legitimately under the law and therefore decide that, even though the evidence on the part of the employee was overwhelming, it could not make an award to him. 
 Will the Minister clarify another point? Am I right in saying that the six-year limitation applies only to Government enforcement officers, either from the Inland Revenue or from the Department for Environment, Food and Rural Affairs? Would it still be possible, in extreme circumstances that are hard to envisage, for an employee to bring a case on his own account? Does the six-year rule refer only to both kinds of Government enforcement officers? The Bill does not make that clear. 
 The Opposition are satisfied with the Bill and we supported it on Second Reading and in the other place. We feel strongly that when a problem arises like the one involving Bebb Travel, the Government are 
 right to act as quickly as possible to ensure that the position is restored to what it was before.

Vincent Cable: We accepted on Second Reading that there was no fundamental dispute and we agreed with the spirit of the Bill. However, I asked on Second Reading whether the six-year limitation was necessary and I would like to pursue that in relation to new subsection (2B).
 We are dealing with a small number of cases. Imagine if, 10 years hence, there were an extreme case of a company that had consistently underpaid for a decade. There might be an even more extreme case in which the employer lost all its records and the employee somehow managed to retain his. Why should there not be an open-ended commitment for an extreme case in which gross exploitation had occurred? 
 I do not fully understand the reason for the six-year limit. It seems unnecessary and would apply only to a small number of cases. By leaving things open, parties to the dispute would have a more open agenda. I cannot understand why the Government feel that it is necessary to introduce a cap.

Alan Johnson: Let me explain the six-year, three-year issue as best I can. The hon. Member for North-West Norfolk (Mr. Bellingham) asked whether we had statistics on how many cases went through sheriff courts in Scotland, compared with employment tribunals. I have to say that I am disappointed with the quality of the statistics that we are getting. However, of those enforcement cases that the Inland Revenue takes on behalf of employees, some 85 per cent. go through the county court and some 15 per cent. go to employment tribunals.
 I am not sure how many cases are pursued individually, through trade unions or by people themselves, and what is the breakdown of the relevant figures. I am, however, clear that most cases go through the county courts for the reason that the hon. Gentleman mentioned, which is that people cannot go to an employment tribunal if it is more three months since the last underpayment. On Second Reading we briefly discussed the fact that people can get 8 per cent. interest on a claim through the county court, which they cannot get through an employment tribunal claim. That is as much as I can tell the hon. Gentleman. 
 I tried to find out from debates on the National Minimum Wage Bill in 1998 the rationale for requirement for records to be kept for three years. I think that it was intended that the provision tie in with other legislation requiring employers to keep records for that period. It was a question of consistency. Nevertheless, the hon. Gentleman is right to raise that issue. He said that that was academic, but it was not academic from April last year. 
 The national minimum wage was introduced in April 1999, so there was the possibility of claims going back three years from April 2002 onwards. An employee is entitled to claim arrears dating back six years if the claim is being enforced, but can claim arrears dating from however long ago if they do not go through enforcement officers and instead take their 
 claim to an employment tribunal. That already applies to county courts. Sheriff courts in Scotland have a five-year limitation, and county courts in the United Kingdom have a six-year limitation. What we are saying through the Bill is that, when enforcement is carried out through the Inland Revenue, there should be consistency, and a period of six years. 
 The hon. Gentleman asked about the disparity between employers having to keep records for only three years, but arrears going back six years being enforceable. On Second Reading, when he argued that we should limit arrears to three years, I said that there was a better case for employers keeping record for six years than for reducing the arrears period. None the less, I shall consider the issue. The Bill will be the acid test, because this is a new experience—there have not been any cases of arrears going back more than three years being pursued. The average arrears go back less than a year. Usually, employers find out about arrears within a reasonable time and the matter is pursued. 
 I do not want to make a big song and dance about the issue if it will be academic, but we will consider what difficulties Inland Revenue enforcement officers have with the absence of records going back more than three years. I suspect, as the hon. Gentleman said, that there will be evidence about pay: employees will have payslips, because most are meticulous—as they should be—about keeping them for many years. Although most employers dump other records after three years, they may well keep records of pay. If a problem occurs, we might need to consider the issue—under the regulations, not the Bill—with a view to extending the requirement to keep records to more than three years. 
 The hon. Member for Twickenham (Dr. Cable) talked about the amendment that we accepted in the other place. The Opposition argued—and we, in the end, accepted—that the rules on enforcement for Inland Revenue acting on behalf of other people should be consistent with those for county courts and tribunals, as long as that did not remove the right of a person to claim arrears going back however far. It was felt that that was a sensible amendment, and I hope that the Committee leaves it in place.

Henry Bellingham: On the rule relating to companies keeping records for three years, is that in company law statute, or is it based on case law? How easy would it be to change that requirement if it made sense to do so in future?

Alan Johnson: I shall write to the hon. Gentleman, because I am not sure about that. My understanding is that the requirement is part of the regulations, not the Bill, and that we could, therefore, change it without too many problems.
 Question put and agreed to. 
 Clause 1 ordered to stand part of the Bill.

Clause 2 - Short title, commencement and extent

Alan Johnson: I beg to move amendment No. 1, in
clause 2, page 2, line 14, leave out subsection (6).
 This is a technical amendment. It is unusual for me to move such an amendment. The subsection (6) was inserted in another place to avoid infringing the privileges of this House as regards charges on public funds. The amendment merely removes the provision.

Henry Bellingham: The amendment makes sense, and we are happy to accept what the Minister says.
 Amendment agreed to. 
 Question proposed, That the clause, as amended, stand part of the Bill.

Alan Johnson: Clause 2 provides that the Bill shall extend to Northern Ireland in addition to the remainder of the United Kingdom—that is the same arrangement as that in the 1998 Act. It also addresses the enforcement of the agricultural minimum wage in Scotland. The reason for that is that agriculture is devolved to Scotland and Northern Ireland and the agricultural minimum wage has been in place throughout the United Kingdom for more than half a century.
 At present, schedule 2 to the 1998 Act makes several amendments to the Agricultural Wages (Scotland) Act 1949 to incorporate several provisions of the national minimum wage into the agricultural minimum wage. The Scottish Executive intend to lay before the Edinburgh Parliament independent, parallel legislation similar to the Bill, but covering only Scottish agriculture. The clause therefore ensures that the Bill's provisions will not be carried across to the 1949 Act. For the sake of total clarity, I tell the Committee that the clause does not affect the existing structure of the national minimum wage or agricultural wages legislation. 
 Although agriculture is also a devolved matter in Northern Ireland, the Committee will be aware that the Stormont Assembly is temporarily suspended. My Department has confirmed with the Northern Ireland Office that it is content for the Bill to cover agriculture in Northern Ireland.

Henry Bellingham: We certainly support the clause, and I am grateful to the Minister for explaining technicalities regarding the devolved Assemblies.
 Clause 2(2) says: 
''The Act comes into force at the end of the period of two months beginning with the day on which it is passed.''
 We talked about that on Second Reading, but I want to return to it because the Minister should be aware that the Bill relates to a vulnerable group of people. Will the Minister give the Committee an update on how many cases are currently on hold as a result of the Bebb decision? A figure of 250 was mentioned in another place, but that was a few months ago so I assume that the volume of cases on hold is building. 
 Obviously, people's entitlement will not be changed and they will receive interest on the outstanding amount. However, will the Minister explain why we must wait for two months after the Bill receives Royal Assent before it comes into force? There are plenty of precedents of Bills coming into force immediately after receiving Royal Assent. I remind him that in recent 
 years, the Education Act 2002, the Anti-terrorism, Crime and Security Act 2001, the Armed Forces Discipline Act 2000 and the Freedom of Information Act 2000 all came into force immediately. 
 The Statute Law Society examined 105 Acts that were passed in the 14 months between January 1978 and April 1979. It found that 41 Acts came into force on the exact day on which they were passed. Twelve Acts came into force on a date specified in those Acts, which is fair enough because some Acts specify a future date. Only 14 Acts came into force after the expiry of two months. 
 On Second Reading, the Minister did not convince Opposition Members about the two-month period. This mini Bill is designed to correct a decision that the Government rightly thought was wrong and that we all thought removed an important provision on entitlement in the original legislation. 
 As I mentioned, the relevant people have been poorly treated and they are a vulnerable group of workers on low pay. Although people's ultimate entitlement will not be compromised, a two-month wait is a long time for them. They might be in another low-paid job, or out of work, so they will be looking forward to receiving their just dues. Why should they wait? That does not make sense. There is no reason why the Bill cannot come into effect immediately, unless the Minister can explain why, if it did come into effect, it would set some form of precedent or lead to technical difficulties.

Annabelle Ewing: The Scottish National party supports clause 2. I seek one clarification, however. It is not related directly to the comments of the hon. Member for North-West Norfolk, but it arises from them.
 The Inland Revenue is still appealing against the ruling of the tribunal. If it wins that appeal, will the Minister say whether there will be danger of confusion, given that, in effect, the courts would be saying that the original Act allowed the Inland Revenue to proceed in the way facilitated by the Bill. As a result, that will be how the 1998 Act will be interpreted and there might be confusion about the Bill. Will the Minister clarify the matter?

Alan Johnson: The hon. Member for North-West Norfolk referred to the period to Royal Assent when we debated the Bill on Second Reading. He asked how many cases there were. I made it clear that the Bill applies in retrospect, so that we can pursue all the cases that have occurred since August 2002 when the Bebb Travel case went against us at the Employment Appeal Tribunal. There will be a delay, but every case will be picked up. There were 250 cases at the time. The hon. Gentleman said that that number was cited some months back; it was not, it was referred to on 11 February. It is now 27 February, and there are still 250 cases.
 The hon. Gentleman's second point was about the fact that we are waiting for Royal Assent. I am always convinced by his arguments, but he represents a party 
 that abolished wages councils and allowed hairdressers to be paid less than £2.10 an hour, so it is a little strange that he is pursuing the case on behalf of low-paid workers. We want to protect them absolutely. 
 There have been previous cases in relation to Royal Assent. The hon. Gentleman referred to many of them on Second Reading, such as the Northern Ireland (Elections) Act 1998 and the Anti-terrorism, Crime and Security Act 2001. I think a lot of the Bill, but I do not consider it to be more important than those Acts. I can understand why their provisions came into effect immediately and did not have to wait after Royal Assent. We sought advice from the Attorney-General, and the protocol is that only in exceptional cases would we not give notice and wait for Royal Assent. Given that we shall apply the measures retrospectively and that we are logging each case for the enforcement officers to pursue, there is no need to have an argument with the authorities about protocol and the Bill. 
 The hon. Member for Perth (Annabelle Ewing) referred to the potential confusion arising from our appeal. As I said on Second Reading, we do not accept that the wording of the original Bill was wrong or misleading. It has operated happily for three years. We have gone to appeal because, if we withdrew, we would have to pay the other side's costs. We could not pre-empt a decision of Parliament, nor could we be sure that we would gain a slot in the parliamentary timetable. 
 Therefore, we decided to take a belt-and-braces approach. We took forward an appeal and we decided to amend the law in case we lost it. If we had waited for the appeal before introducing the Bill, even greater delay would have been the result. There will be no confusion. If we win the appeal, many parliamentary draftsmen will be saying, ''Well, we were right all along and we told you so,'' and we will feel better, particularly those hon. Members who scrutinised the National Minimum Wage Bill in Committee in 1998. However, the Bill will make the matter absolutely clear, and that will protect us against any challenges or weird decisions that might arise in future. 
 We thought that the provision was clear enough, but for the avoidance of any doubt, we have made it absolutely clear that enforcement officers can claim purely for arrears—not arrears, current up-rating and future up-rating. They can go for arrears alone. As the Bill makes that absolutely clear, I do not think that any confusion can arise. It is sensible of us to deal with the matter in this way, given the concerns that have been expressed by hon. Members on both sides of the House about the need to protect low-paid workers. 
 Question put and agreed to. 
 Clause 2, as amended, ordered to stand part of the Bill. 
 Bill, as amended, to be reported. 
 Committee rose at twenty-five minutes past Nine o'clock.